TRADE-OFFS BETWEEN SEVERANCE TAX REVENUES AND COAL MINING EMPLOYMENT

A severance tax can provide local jurisdictions with additional revenues to finance economic development, yet the imposition of a tax may create coal industry employment losses. This research analyzes this issue by examining the demand for Pennsylvania steam coal, providing estimates of the unconditional own-price elasticities of demand for coal in each of two demand regions. These estimates in conjunction with labor/output coefficient estimates are used to determine the extent to which coal employment in a region already witnessing slow mining industry growth will be negatively affected.